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NEW YORK, Dec 12 (Reuters) – Options traders are bracing for a week of swings in US stocks ahead of key inflation data, the Federal Reserve’s last policy meeting of 2022 and the final monthly options expiration of the year.

Inflation data and the Fed’s outlook on monetary policy could give traders more clarity on how much further the central bank may need to raise rates in its battle to cool consumer prices, potentially determining the trajectory of a late-year rally in stocks that has seen the S&P 500 bounce 14% off its October lows. The index remains down 17% for the year.

Pricing in the US options market on Monday implied investors were positioned for the S&P 500 to move 2.5% in either direction in the wake of Tuesday’s consumer price report, which covers November, data from options market-making firm Optiver showed.

A big move would be par for the course in a year during which CPI data has sparked explosive market gyrations, as surging inflation forced the Fed to embark on its most aggressive monetary policy tightening since the 1980s.

The S&P 500 has moved an average of around 3% in either direction over the past six CPI releases, including a 5.5% jump on Nov. 10, when inflation data came in weaker than expected. That compares with an average daily move of about 1.2% over the same period.

A second dose of softer-than-expected inflation data could bolster the case for those arguing that inflation may have peaked.

On the other hand, “with the October CPI reading having spurred such an outsized positive reaction, the market is implying what could be an even bigger move to the downside if inflation comes in meaningfully higher than expectations,” said Tom Borgen-Davis, head of equity research at Optiver.

Meanwhile, options prices are projecting a 1.8% swing in either direction for the S&P 500 in the hour immediately following Wednesday’s FOMC decision, Optiver data showed.

While investors broadly expect the Fed to raise rates by 50 basis points, Wall St will be focused on the central bank’s projections for how high rates will ultimately rise and to what degree the US economy can withstand monetary tightening.

Friday also marks the last monthly options expiration for the year, an event where traders looking to replace a large number of expiring contracts can cause a surge in trading volumes.

Brent Kochuba, founder of options analytic service SpotGamma, said that for now, options positioning is “very balanced between calls and puts,” giving little indication of which way traders expect the markets to swing in the wake of Tuesday’s and Wednesday’s events.

That balance in positioning may help suppress volatility around the FOMC decision, Kochuba said. However, once this week’s options expiration is out of the way, the stock market may be more prone to swings in either direction, he said.

“The direction of that move is Fed dependent,” Kochuba said.

(Reporting by Saqib Iqbal Ahmed; Editing by Ira Iosebashvili; Editing by Andrea Ricci)

 

Dec 12 (Reuters) – Gold prices slipped on Monday as investors stayed on the sidelines awaiting US inflation data and the Federal Reserve’s rate-hike decision later this week.

Spot gold was down 0.9% at USD 1,780.19 per ounce by 15:29 p.m. ET (2029 GMT). US gold futures settled 1% lower at USD 1,792.30.

“The markets are pulling back ahead of the Fed and the next couple of days is going to be pretty volatile,” said Daniel Pavilonis, senior market strategist at RJO Futures.

The US central bank is widely expected to raise interest rates by 50 basis points at its final meeting of 2022 scheduled on Dec. 13-14.

The European Central Bank and the Bank of England are also set to announce interest rate decisions this week.

Lower rates tend to boost gold’s appeal as it decreases the opportunity cost of holding non-yielding bullion.

Data on Friday showed US producer prices rose slightly more than expected in November, reinforcing the view that the Fed may have to keep interest rates higher for longer.

Focus now shifts to the US consumer price index (CPI) report for November that is due on Tuesday.

“Ahead of the key data print, the current strength of the market would be tested on a break below USD 1,765, a level where support was found on several occasions last week,” said Ole Hansen, head of commodity strategy at Saxo Bank.

US Treasury Secretary Janet Yellen on Sunday forecast a substantial reduction in US inflation in 2023.

Meanwhile, spot silver dipped 0.7% to USD 23.30 per ounce.

“The overall scenario remains supportive (for silver), while investors are betting on solid demand in the next few years,” Carlo Alberto De Casa, external analyst at Kinesis Money, said.

Platinum dropped 2.2% to USD 999.73 per ounce, and palladium slid 3.5% to USD 1,881.47.

(Reporting by Brijesh Patel in Bengaluru; Editing by Maju Samuel and Shounak Dasgupta)

 

SINGAPORE, Dec 12 (Reuters) – Oil prices rose as much as more than 1% on Monday as a key pipeline supplying the United States remained shut while Russian President Vladimir Putin threatened to cut production in retaliation for a Western price cap on its exports.

Brent crude futures were up 41 cents, or 0.5%, at USD 76.51 a barrel by 0730 GMT. US West Texas Intermediate crude was at USD 71.55 a barrel, up 53 cents, or 0.8%.

The price gains on Monday for Brent and WTI came after both grades fell last week to their lowest since December 2021 amid concerns that a possible global recession will impact oil demand.

“Oil prices are higher as the Keystone pipeline remains shut, China’s COVID controls ease and on concerns that Russia could reduce output,” said Edward Moya, a senior market analyst for OANDA.

On Sunday, Canada’s TC Energy said it had not yet determined the cause of the Keystone oil pipeline leak last week in the United States. It gave no timeline as to when the pipeline would resume operation.

The 622,000 barrel-per-day Keystone line is a critical artery shipping heavy Canadian crude from Alberta to refiners in the U.S. Midwest and the Gulf Coast.

China, the world’s biggest crude oil importer, continued to loosen its strict zero-COVID policy, though streets in the capital Beijing remained quiet and many businesses stayed shut over the weekend, with residents saying a return to normal was a long way off.

On Monday, queues formed outside fever clinics on Monday in the cities of Beijing and Wuhan, where COVID first emerged three years ago, a sign of the rapid spread of symptoms after authorities began dismantling stringent measures against the disease.

Putin said on Friday that Russia, the world’s biggest exporter of energy, could cut production and would refuse to sell oil to any country that imposes a “stupid” price cap on Russian exports agreed by G7 nations.

While the uncertainty surrounding European Union sanctions on Russian oil and the related price cap kept volatility high on prices, the sanctions have had a limited impact on global markets so far, ANZ analysts said in a note.

Saudi Arabia’s energy minister also said on Sunday that the impact of the European sanctions and price cap measures had had no clear results yet, and that its implementation was still unclear.

In the US, Treasury Secretary Janet Yellen forecast a substantial reduction in US inflation in 2023, barring an unexpected shock.

 

(Reporting by Florence Tan and Emily Chow in Singapore; Editing by Christian Schmollinger, Bradley Perrett and Simon Cameron-Moore)

NEW YORK, Dec 12 (Reuters) – Oil prices settled up about USD 2 a barrel on Monday on supply jitters, as a key pipeline supplying the United States closed and Russia threatened a production cut even as China’s loosening COVID-19 restrictions bolstered the fuel demand outlook.

Brent crude futures settled at USD 77.99 a barrel, gaining USD 1.89 or 2.5%. US West Texas Intermediate crude settled at USD 73.17 a barrel, rising USD 2.15, or 3%.

Last week, Brent and WTI fell to their lowest since December 2021 as investors worried a possible global recession could hurt oil demand.

The potential of a prolonged outage of TC Energy Corp’s TRP.TO Canada-to-US Keystone crude oil pipeline helped turn prices around.

“Keystone Pipeline repair appears to be taking longer than expected (and) upping the possibility of further stock draws at Cushing,” said Jim Ritterbusch at Ritterbusch and Associates.

Traders worried about how long it would take to clean up and restart the Keystone oil pipeline after more than 14,000 barrels of oil leaked last week, the largest US crude oil spill in nearly a decade.

TC Energy shut the pipeline after the spill was discovered late last Wednesday in Kansas. The company told officials in Washington County, Kansas, that they have not yet determined the cause or timeline for a restart. Officials were excavating around the 622,000 barrel-per-day Keystone line, a critical passageway for heavy Canadian crude shipped to US refiners and to the Gulf Coast for export.

The outage is expected to shrink supplies at the Cushing, Oklahoma storage hub, and delivery point for benchmark US crude oil futures.

Seven analysts polled by Reuters estimated, on average, that overall crude inventories dropped by about 3.9 million barrels in the week to Dec. 9, a preliminary Reuters poll showed.

Bank of America Global research said Brent could rebound past USD 90 per barrel on the back of a dovish pivot in the US Federal Reserve’s monetary policy and a “successful” economic reopening by China.

“China’s reopening is definitely something the market is focused on,” said Phil Flynn, analyst at Price Futures group.

China, the world’s biggest crude oil importer, continued to loosen its strict zero-COVID policy, though streets in the capital Beijing remained quiet and many businesses stayed shut over the weekend.

On Monday, queues formed outside fever clinics in the cities of Beijing and Wuhan, where COVID first emerged three years ago.

“Oil markets will likely stay volatile in the near term amid uncertainty over the impact on Russian output from the EU’s ban, headlines on China’s COVID policy, and central bank movements in the US and Europe,” UBS analysts said in a note.

Russian President Vladimir Putin said on Friday that Russia could cut production and would refuse to sell oil to any country that imposes a “stupid” price cap on Russian exports.

Saudi Arabia’s energy minister also said on Sunday that price cap measures had no clear results yet.

The number of tankers waiting to pass through Istanbul’s Bosphorus Strait fell on Monday, showing an easing of the recent build-up in traffic.

“The emergent EU embargo on Russian crude… may add moderate upside energy price risks in the next few months. But supply uncertainty should ease by spring 2023, after the embargo on oil products (on Feb.5) plays out,” Deutsche Bank said in a note.

(Additional reporting by Dmitry Zhdannikov, Florence Tan and Emily Chow in Singapore; Editing by Marguerita Choy and David Gregorio)

 

Dec 9 (Reuters) – Gold prices rose on Friday despite an uptick in the dollar and US bond yields as some investors still expect the Federal Reserve will slow the pace of rate hikes from early next year.

Spot gold rose 0.5% to USD 1,798.40 per ounce, as of 1907 GMT. US gold futures settled 0.5% higher at USD 1,810.70.

“The market seems to be focused on a light at the end of the tunnel, a point at which the Fed is done raising interest rates and based on that we’ve seen general support in gold,” said David Meger, director of metals trading at High Ridge Future.

A 50-basis-point rate hike is widely expected to be delivered by the Fed at its final meeting of 2022 scheduled on Dec. 13-14.

Rate hikes to fight soaring inflation raise the opportunity cost of holding zero-yield bullion.

How long this positive sentiment towards gold lasts will be dependent on how much the US central bank increases its benchmark rate by and the rhetoric of Fed Chair Jerome Powell at the post-meeting press conference, Kinesis Money analyst Rupert Rowling said in a note.

However, data showed US producer prices rose more than expected in November, adding to market uncertainty over the Fed policy outlook.

Following the data, the dollar edged up, making gold more expensive for overseas buyers, while yields on 10-year Treasury notes also gained.

Focus now shifts to the US Consumer Price Index data due on Dec. 13.

“If CPI runs hot, you might see a strong case for the Fed to deliver back-to-back half point rate increases before they pause, which might suggest gold might give back some of the gains its made over the past month,” Edward Moya, senior analyst with OANDA, said in a note.

Elsewhere, spot silver rose 1.8% to USD 23.48 per ounce, platinum climbed 2.1% to USD 1,024.00. Palladium gained 1.7% to USD 1,958.79.

(Reporting by Kavya Guduru in Bengaluru; Editing by Maju Samuel and Susan Fenton)

 

LONDON, Dec 9 (Reuters) – US inventories of diesel, heating oil and other distillate fuel oils are rising rapidly in response to slowing consumption and a delayed reaction to high prices.

US distillate fuel oil stocks increased by six million barrels over the seven days ending on Dec. 2, according to data from the US Energy Information Administration (EIA).

Distillate inventories have risen by a total of 13 million barrels over the eight weeks since Oct. 7 (“Weekly petroleum status report”, EIA, Dec. 7).

Distillate inventories have accumulated at a time of year when they would normally be depleting, a signal the market balance has shifted decisively.

Stocks depleted by an average of six million barrels over the same period in the ten years before the COVID-19 pandemic.

But in 2022, inventories have risen at the fastest seasonal rate since 2001, when the economy was in recession and transport had been extensively disrupted by the attack on the World Trade Centre.

Stocks are still 17 million barrels (-13% or -0.83 standard deviations) below the pre-pandemic five-year seasonal average, but the deficit has halved from 34 million barrels (-24% or -2.05 standard deviations) in early October.

In the past, increases in inventories at this time of year have been associated with high prices (2000 and 2005) or a slowdown in the business cycle (2001 and 2008) suppressing consumption.

There are signs the pattern is repeating. The volume of distillate supplied to the domestic market (a proxy for consumption) slowed to just 3.73 million barrels per day (bpd) in the four weeks to Dec. 2, the lowest since 2015.

In a sign of slowing demand from the freight sector, the number of intermodal containers hauled on US railroads in October was the lowest for the time of year since 2013, according to the US Bureau of Transportation Statistics.

Net distillate exports have slowed to around 1.0 million bpd from 1.4 million bpd in September, implying foreign consumption also slackened.

As the global business cycle decelerates, softening consumption of middle distillates in manufacturing and freight transport is starting to rebuild depleted inventories.

(John Kemp is a Reuters market analyst. The views expressed are his own; editing by Mark Potter)